WTO: E-Commerce JSI news - one new participant and US drops support for data rules
This week saw some good and bad news for the WTO Joint Initiative on Electronic Commerce, which also has potential implications for IPEF.
Starting with the good - The Gambia joined the negotiations on 23 October becoming the 90th participant. This means the negotiations now cover around 55% of WTO Members (in addition to over 90% of global trade). It also brings the number of African States participating to seven, and adds another least-developed country to the plurilateral (which goes against the allegations of the Joint Initiative being contrary to developing country interests).
More concerningly though - particularly as the negotiators are hoping to wrap things up ahead of MC13 - the United States has announced it is withdrawing its support for some of the key data rules, namely data flows, data localization and source code.
This move isn’t necessarily unexpected given the change in the United States’ domestic politics around Big Tech. However, these rules are key interests of business stakeholders and would have provided concrete benefits from the Joint Initiative. So not achieving them will be a real loss.
That said, the data rules were always going to be difficult for the Joint Initiative to find agreement on. Not only were developing countries - and those without digital trade provisions in their FTAs - concerned about them, but resolving differences between the US and the EU would have required some innovative compromises. Adding China to this mix only made things even more complicated.
Dropping the data rules may also make it easier to get to an overall landing zone in the negotiations sooner. It will relieve some of the drive for flexibilities and transition periods for economies concerned by these rules, and also remove the need for some exceptions such as links to services/investment non-conforming measures that exist in agreements such as CPTPP. The change may also help simplify discussions on legal architecture and encourage more members to join.
In the absence of data rules, there is now likely to be increased pressure for the Joint Initiative to show real benefit through its other provisions. This is possible through its work on electronic transactions, digital trade facilitation, new telecommunications rules, and consumer protection. But the outcomes will need to be credible and demonstrate value (a moratorium on customs duties on electronic transmissions would meet this mark but its prospects remain uncertain at best).
As an aside, this change from the US may also provide a hint at what to expect in IPEF’s Pillar I (Trade) discussions. If the US is dropping the data articles in the IPEF negotiations as well, you can expect criticism from industry, but it may also ease India’s concerns around IPEF’s digital rules removing at least one barrier to them joining the Trade Pillar negotiations.